Nigerian Stock Market Suffers N757bn Loss in Two Days

Investors at the stock market of the Nigerian Exchange Limited (NGX) have been hit with a staggering loss of N757 billion in just two days. This dramatic plunge in market value was triggered by Nigeria’s demotion from a frontier to an unclassified market status by FTSE Russell, a subsidiary of the London Stock Exchange Group (LSEG).

The downgrade by FTSE Russell, the subsidiary of London Stock Exchange Group (LSEG) is on the backdrop of challenges by Nigeria’s foreign exchange (FX) which is a new source of negative sentiment that is capable of triggering stock sell off at the Exchange.

The stock market had closed last week at N37.295 trillion, dropped by 2.07per cent or N757 billion to close yesterday at N36.538 trillion.

The Vice President, Highcap Securities Limited, David Adnori attributed the decline in stock market performance to a possible downgrade by FTSE Russell, stressing that foreign investors since the report was released have shown negative sentiments.

According to him, “The decline in the stock market can be linked to FTSE Russell downgrade and other macroeconomy reports. For instance, the revenue target of the FG may not be realised because daily crude oil production is 1.6mpd whereas Nigeria is only producing up to 1.2mpd.

“I think the FTSE Russell report may be relevant to foreign investors who have been suffering from the inability to repatriate their dividend for several years.

“Capital market cannot be held for foreign exchange crisis because investors are paid in Naira. Since they brought dollar into the stock market based on the agreement with CBN on capital importation, then the responsibility was on CBN to facilitate the conversion of naira income to foreign currencies and remit abroad

“CBN has failed on its responsibilities and as it is now, it is like foreign investors’ have transferred aggression to the capital market. The foreign exchange crisis does not have anything to do with domestic investors.”

FTSE Russell said further to the ‘FTSE Equity Country Classification – Watch List Status of Nigeria’ announcement published on June 30 that it has received feedback from market participants that although Nigeria has adopted a floating foreign exchange rate for the Naira in the Investors’ & Exporters’ (I&E) FX Window, which is now operating on a “Willing Buyer, Willing Seller” basis, “the lack of liquidity in the I&E FX Window continues to adversely impact the ability of international institutional to replicate benchmark changes”.